India remains on the currency watch list of the US Treasury Department
Washington:
India remained on the US Treasury Department’s currency “monitoring list” of major trading partners on Friday as Washington placed India, along with 11 other major economies, to focus on their currency practices and macroeconomic policies.
The countries are China, Japan, South Korea, Germany, Italy, India, Malaysia, Singapore, Thailand, Taiwan, Vietnam and Mexico, the US Treasury Department said in its semi-annual report to Congress in the Major’s Report on Macroeconomic and Foreign Exchange Policies . United States trading partner.
A media release said that except Taiwan and Vietnam (which were subject to increased engagement) were on the watch list as of December 2021 report.
“The Administration continues to advocate strongly for our key trading partners to carefully examine policy tools to support a strong and sustainable global recovery. An uneven global reform is not a resilient reform. It accelerates inequality. , exacerbates global imbalances and increases risks to the global economy,” said Treasury Secretary Janet L. Yellen.
Explaining its decision to keep India on the list, the Treasury said that India met two of the three criteria in the December 2021 and April 2021 reports, had a significant bilateral trade surplus with the US and consistently, was engaged in unilateral intervention. reporting period.
“India met only the significant bilateral trade surplus limits in this report,” the Treasury said, adding that India will remain on the watch list for two consecutive reports until it meets less than two criteria.
According to the report, India ($569.9 billion) has the fourth largest foreign exchange holding after China ($3.2 trillion), Japan ($1.2 trillion) and Switzerland ($1 trillion).
“Reserves have been elevated as a result of RBI foreign exchange purchases in recent years. As of December 2021, foreign exchange reserves totaled $570 billion, equivalent to 18 per cent of GDP and remaining 209 per cent of short-term external debt at maturity,” it said.
In the 2021 external sector report, the IMF decided that India’s reserves at that time were 197 per cent of the IMF’s reserve adequacy metric by the end of 2020.
The rupee weakened against the US dollar during 2021, depreciating 1.9 per cent during 2021, similar to several Asian emerging market counterpart currencies, the Treasury said.
The volatility in the rupee was pronounced during the first half of 2021 as the economy grapples with the larger, second COVID-19 outbreak; Subsequently, the rupee depreciated continuously against the dollar during the second half of the year.
“In contrast, the rupee did relatively well against the currencies of many of India’s regional trading partners – on a nominal effective and real effective basis, the rupee appreciated by 0.8 per cent and 2.2 per cent in 2021, respectively,” the report said. stated in. ,
It said Indian authorities should allow the exchange rate to move flexibly to reflect economic fundamentals, limit foreign exchange interference to conditions of chaotic market conditions, and avoid further significant reserve accumulation.
“As economic recovery progresses, officials should continue to pursue structural reforms that can help elevate productivity and standards of living while supporting an inclusive and green recovery,” the Treasury said.
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